WASHINGTON, D.C. — From trying to rent to trying to buy, Americans are facing some of the most significant rent and home price increases in years.
“Now, it’s not affordable,” said renter Dawn Elder.
The prices are driven, in part, by a lack of available and affordable homes and apartments.
“You put in offer after offer and they’re like, ‘they went with a cash offer, they went with a cash offer,” said realtor Michael Notbohm.
However, one thing that there is plenty of right now is empty office space.
“We have a housing shortage and we have a surplus of office buildings, and let's try to match that up,” said Lawrence Yun, chief economist with the National Association of Realtors.
When the pandemic ushered in the era of remote work, demand for office space took a hit. Now, some of those buildings are undergoing a dramatic change.
“It's great to see some cities are doing the conversion,” Yun said.
The conversion refers to taking empty office buildings and turning them into apartments or condominiums instead of creating a new building from scratch.
Some cities are seeing a dramatic increase in office building conversions. A recent report found that of the more than 20,000 apartment conversions done last year, 41% were in former office buildings.
Philadelphia and Washington, D.C. lead the way in apartment conversions, with Cleveland, Detroit and Kansas City also among the top 10 cities.
“There is a housing shortage,” Yun said. “At the same time, office buildings are becoming emptier and therefore it makes sense to do some conversion to make it more useful.”
Yet, there’s a catch to all these conversions: affordability.
“Sometimes, it is really hard to make the numbers work,” Yun said.
He added that developers often opt for creating higher-priced units because of the cost involved in converting an office space — which includes adding things like kitchens and bathrooms that didn’t exist there before.
“Private conversion generally tends to be on the upper end because the investors want to extract rate of return and sell property at high prices,” Yun said, “but what is really needed for society is affordable housing.”
He said one thing that could help with that would be a federal tax incentive for developers, which would be tied to creating affordable housing units in office conversions.
Some local municipalities are already doing that, but Yun said more is needed to help downtown areas recapture their hustle and bustle.
“You have more people walking around, and naturally, it makes the city much more vibrant than before,” he said.
It’s a way that office conversions could potentially add to the liveliness of city life.